from tpi's annual report, page-5

Hey all

This research report was released by Westpac on Friday. thought id post on here on hc.

Given they have gone acquistion crazy in recent times, it would be very surprising if TOX was not tagged as a potential target.

Hopefully they can hold off for another year or so and just wait until TOX hits 30c. Itd be a shame to see them being taken over now at 15c.

Cheers


Transpacific Industries Group Limited (TPI)

Bullish tone at AGM

Recommendation 18/11/2005: Hold

Investment Rating
TPI provides waste management, recycling and industrial cleaning services - all largely essential services - and also distributes premium-end, heavy duty commercial vehicles. In recent years it has grown rapidly via acquisition while benefiting from the resources boom and the strengthening A$. In the Waste Management and Recycling division and Industrial Services divisions, TPI's rapidly increasing scale in terms of range of services and geographical coverage is delivering a powerful market position. The Commercial Vehicles strategy is dependent on exclusive arrangements with suppliers of niche, high-end product, and is more exposed to business cycles. The stock has both defensive and growth attributes.


Event

At the AGM, TPI allayed some of our fears about weakness in the commercial vehicles division.

Full Event Analysis

Impact

Yes, the truck market is a bit weaker due to higher fuel prices but is having only a small impact on TPI's business. The waste and industrial services divisions are more than compensating and the guidance is that FY06 NPAT will be about $47m, above the market consensus forecast of $45m and well above the Prospectus forecast of $38m.


Recommendation Impact
(Last Updated: 18/11/2005)
Following the bullish AGM tone we have increased our Accumulate limit to $4.40. Note that in view of the ongoing acquisition activity we have decreased our dividend forecasts by 2c in both FY06 and FY07.


Event Analysis

This bullish outlook appears to some degree to reflect another acquisition, the liquid waste and industrial services operations of Onyx in NZ. This acquisition will fit well with the current NZ operations and generate significant cost savings. The company did not provide details of the acquisition price nor the earnings profile of Onyx. Additional acquisitions in both NZ and Australia will further consolidate the waste management and recycling sector.

Over the next two years TPI will embark on several new initiatives including plants to convert waste oils to fuels, water treatment services in a joint venture with Worley Parsons and the treatment of contaminated soils. The company has created a very strong base allowing it to offer an increasing range of environmental and other specialised industrial services. Returns are high and cash flow strong. The risk is that it moves too quickly.